China is the fourth largest supplier of goods to Saudi Arabia, while the Kingdom is the No. 1 oil exporter to China. Last year, it bought 22.2 million tons of crude oil from the Kingdom. This year, in the first three quarters, it bought 20 million tons, 17 percent of its crude import total.
In a wide-ranging interview, Li Yan Lin, economic and commercial counselor at the Chinese Embassy in Riyadh, told Arab News that the relationship between the two countries is poised for further expansion following the landmark visit of Custodian of the Two Holy Mosques King Abdullah to China in January this year and the return visit of President Hu Jintao to the Kingdom in April.
“China was the first stop on King Abdullah’s first overseas trip since he ascended the throne, which shows that he places great importance on developing relations between our two countries. Even as crown prince he was keen to develop good bilateral relations in political, economic and international affairs as well as in other fields.”
Li pointed out that six agreements were signed during King Abdullah’s visit to China in January and five during President Hu’s visit in April. The two visits open a new chapter of Sino-Saudi relations, he said, laying a fast track for expanding trade and economic cooperation. The economic counselor believes that the friendly political relations and complementary make-up of the two countries’ economies constitute a strong foundation for a strategic alliance between the two countries. These ties are set for further expansion, driven by Chinese energy demand which has been growing rapidly in the wake of the country’s economic development.
“In recent years, mutual investment in the energy sector has become the highlight of bilateral cooperation. Chinese companies are investing in the natural gas sector in Saudi Arabia, while Saudi companies are investing in several refinery and petrochemical projects in China,” he said.
As for follow-up action in the wake of the king’s visit, he said the embassy’s priority was to implement the agreements signed during the visit. These include promoting cooperation in investment, in technology and the energy sector, strengthening bilateral economic and trade relations, and encouraging more Chinese companies to become involved in infrastructural development in the Kingdom.
According to Li, the past year witnessed comprehensive growth in ties in the following areas:
Energy: The two state-owned oil companies of the countries signed a memorandum of understanding on cooperation in the energy sector.
Trade: Bilateral trade hit $16.07 billion last year, a 56.1 percent increase over 2004, with a projected figure of over $20 billion this year.
Investment Promotion: Two refinery projects in China with investment from Saudi Aramco are going smoothly. The Chinese oil company, Sinopec, has invested more than $150 million in natural gas exploration projects in the Kingdom. Refinery, petrochemical and cement factory projects executed by Chinese companies have become operational. These contracts are totally worth $3 billion.
FTA (free trade agreement) negotiations between China and the GCC are into their fourth round. Commodities trade negotiation is in the final stages while service trade negotiations have just started. The coming FTA agreement between China and GCC states is expected to have a major impact on bilateral trade and economic development.
Intensified communication and interaction between government organs and companies. The number of exhibitions and seminars, tourists and business visitors is being increased.
Li said that although there was a sharp increase in bilateral trade in recent years, China faces a huge trade deficit with the Kingdom. “Chinese commodities account for only six percent of the market share in the Kingdom — far behind America, Japan and Germany. Besides the traditional advantages in textile, clothing, shoes and light industry products, Chinese companies are strengthening their presence in household appliances, IT products, machinery and the automobile industry. There is great potential for trade in these products. We hope that the Saudi government could expedite matters in holding exhibitions, registering companies and issuing visas for Chinese companies.”
Even so, bilateral trade rocketed to $13.1 billion by August this year, a 31 percent increase over the same period last year. Of this Chinese exports to the Kingdom accounted for $3 billion, a 26 percent increase over the same period in 2005, and imports from Saudi Arabia $10.1 billion, up 33 percent for the same period last year. The trade deficit for China during the first eight months was $7.1 billion. On the question of mutual investment between the two countries, the Chinese diplomat said it had started on a promising note. China, as a fast growing economy, was improving its investment environment to become the best choice for investors including those from Saudi Arabia. “We hope more and more Saudi businessmen could go to China to see the improvement personally.”
Li continued: “We are going to promote awareness about investment laws in China in order to let Saudi businessmen know more about the country. At the same time, we are going to cooperate with the Saudi Arabian General Investment Authority (SAGIA) to seek preferential treatment for Chinese companies and encourage them to invest in Saudi Arabia.” He pointed out that Chinese companies had won many projects in recent years, including a refinery project, a petrochemical plant and cement factory projects. These projects are worth a total of $3 billion. Another major Chinese industrial joint venture project worth over $4 billion is to be established in the Kingdom shortly, according to Amr Al-Dabbagh, governor of SAGIA, who was in China earlier this month.
According to Li, Chinese firms will compete for their share of the market when tenders are floated for mega projects such as the new economic cities, the King Abdullah Financial District in Riyadh, Jeddah airport redevelopment, water, electricity, road and railroad construction, as well as the huge investments earmarked for the energy sector over the next five years.